(Adds not guilty pleas at arraignment)
By Emily Flitter and Nate Raymond
NEW YORK, June 25 (Reuters) - U.S prosecutors in Manhattan
announced charges Wednesday against two men they said
participated in a ring of information-sharing that led to
illegal trading in a technology company acquired by IBM Corp
Benjamin Durant, 37, was charged with two counts of
securities fraud and one count of conspiracy, while Daryl
Payton, 38, was charged with three securities fraud counts and
one conspiracy count.
Both were arrested during the morning, and later pleaded not
guilty in Manhattan federal court. Their lawyers declined to
comment following the arraignment.
Three people have already admitted to sharing and trading on
secret information provided by a corporate lawyer working on
IBM's purchase of software maker SPSS Inc in 2009.
The lawyer, who has not been charged, was identified in a
related U.S. Securities and Exchange Commission lawsuit on
Wednesday as Michael Dallas, a former associate at the New York
law firm Cravath, Swaine & Moore.
IBM's full name is International Business Machines Corp. A
Cravath spokeswoman did not immediately respond to a request for
comment, nor did an employer listed for Dallas on his LinkedIn
page. Dallas could not immediately be reached.
Authorities said Dallas shared information about the SPSS
deal with his friend Trent Martin, an analyst at Royal Bank of
Scotland Group Plc, who then told his roommate Thomas
Conradt, who worked at Euro Pacific Capital Inc of Westport,
Prosecutors say Conradt and a trading colleague, David
Weishaus, bought call options on SPSS before IBM's bid was
announced, and Conradt tipped Durant and Payton.
Martin, Conradt and Weishaus pleaded guilty last year to
charges related to the trades, and agreed to cooperate in the
Payton and Durant were also working for Euro Pacific at the
time of the trading, according to public records kept by the
Financial Industry Regulatory Authority.
FINRA records show they left Euro Pacific at the same time
the SEC informed the firm it was investigating them for options
trades they made. The firm is not named in the indictment, which
describes it as "Securities Trading Firm-1."
Andrew Schiff, director of marketing at Euro Pacific, said
the firm cooperated in the investigation and has terminated
employees who were implicated. He said the firm has received no
indication from the SEC or FINRA that it might be a target.
According to the indictment, Durant said he had heard about
SPSS while researching investment opportunities on Fidelity.com,
while Payton claimed to hear about the stock from Durant.
The men then refused to answer further questions about the
trades and were fired, the indictment said.
The indictment also cited an unnamed co-conspirator at Euro
Capital who also bought options based on the inside information,
resulting in a profit of $44,250. That person's identity could
not be immediately determined.
The case is US v. Benjamin Durant and Daryl Payton, U.S.
District Court, Southern District of New York, No. 12-cr-00887.
(Reporting By Emily Flitter; Additional reporting by Nate
Raymond and Joseph Ax; Editing by Jonathan Oatis, Bernard Orr)